In delivering these objectives, South Africa will be following the same path and so also competing for resources with every major economy in the world. The US Department of Energy’s National Transmission Planning Study, 2 published in October 2024, found that a expansion of the US transmission system to 2.4-3.5 of its size in 2020 would deliver the largest benefits across a wide variety of its potential development scenarios. Similarly, in its December 2024 monitoring report, the European Union Agency for the Cooperation of Energy Regulators (Acer) said “annual grid investment in Europe is estimated to double until 2050, reaching up to EUR 100 billion”. 3 The UK’s National Energy System Operator (NESO) said in 2024 that network expansion needs to happen at more than four times the rate of the last decade. 4 A role for private finance Consequently, bringing in some form of private sector participation may be the only way to make available the necessary finance and project delivery capacity. The government has said it is working on financing solutions which will tap into private sector funding to unlock new generation projects and alleviate power shortages, while ensuring that Eskom retains ownership of the grid. The solutions include the establishment of an independent transmission project office, which will be responsible for accelerating grid investment through private finance, contractors, and operators. Public-private partnerships funding models could be used to expand and strengthen the electricity grid at speed and scale. Studies done on private sector transmission models suggests that the conventional state procured independent power transmission (IPT) and independent power producer (IPP) models could both be adopted to expand the grid. The authorities are also exploring funding possibilities through its Just Energy Transition Investment Plan. In December, the government launched the ITP market sounding exercise, as a precursor to the launch of the ITP pilot tender planned in 2025. The government recognises that both public and private capital are essential to achieve its infrastructure investment goals. It has identified
the ITP programme as a solution to unlocking private investment capital in transmission, given its constrained fiscal position and NTCSA’s limited balance sheet. The first ITP projects phase aims to expand the grid by 14,000km by 2032, starting with the construction of 1,164 km of new 400kV transmission lines and 2,630 MVA transformers in seven key corridors across three provinces. The projects located in Aries-Aggeneis, Groeipunt (Northern Cape), Mahikeng (North West), and the West Rand (Gauteng) are expected to unlock 3,222MW of renewable energy capacity by 2030. The draft regulations set out licensing conditions, including requirements for technical and financial capability and mechanisms for building and operating infrastructure. The regulations also specify how investors should recover their full costs. Tolling mechanisms will facilitate cost recovery through wheeling charges or long-term user agreements. The private sector will finance and operate the network, with the NTCSA responsible for grid planning, system operations, and reliability management. The ITP framework has been shaped by a market- sounding exercise launched in December 2024 to gather alternative models for transmission infrastructure development, potential delivery mechanisms, and private sector interest and readiness. Results of the exercise have shown that many of the local and international respondents are interested in participating in the ITP and prefer the built, operate and transfer (BOT) model or built-own- operate-transfer (BOOT). The framework draws on best international practices in China, Brazil, Chile, India, Peru, and Europe. In the next stages of the ITP procurement, a request for qualification is expected to be released to the market in July followed by a request for proposals (RFP) in November, marking the official introduction of the tender process for the first ITP projects.
2 National Transmission Planning Study, US Department of Energy: www.energy.gov/sites/default/files/2024-10/NationalTransmissionPlan ningStudy-ExecutiveSummary.pdf 3 Electricity Infrastructure Development to Support a Competitive and Sustainable Energy System, European Union Agency for the Cooperation of Energy Regulators (Acer) 2024 Monitoring Report, 16 December 2024: www.acer.europa.eu/sites/default/files/documents/ Publications/ACER_2024_Monitoring_Electricity_Infrastructure.pdf 4 Electricity transmission infrastructure: what’s changed. Ofgem, 13 December 2024: www.ofgem.gov.uk/blog/electricity-transmission- infrastructure-whats-changed
South Africa’s Energy Prospects
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